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Suven Life RI review (Avoid)

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•    SLSL is engaged in the discovery and development of novel pharma products. 
•    It has been posting losses for the reported periods of the RI offer documents. 
•    Based on its financial performance, the issue is highly-priced. 
•    There is no harm in skipping this pricy offer. 

ABOUT COMPANY:
Suven Life Sciences Ltd. (SLSL) is a biopharmaceutical company, focused on discovering and developing novel pharmaceutical products, for central nervous system ("CNS") disorders using G Protein-Coupled Receptor targets. Its focus has been on the discovery and development of innovative molecules targeting diseases and areas, which has undiscovered medical treatment opportunities. The Company singularly focuses on the development of "New Chemical Entities" ("NCEs") molecules for CNS diseases such as Alzheimer's, various forms of Dementia, Narcolepsy, Major Depressive Disorder ("MDD"), Attention Deficient Hyperactivity Disorder ("ADHD"), Huntington's disease, Parkinson, Bipolar disorder and different forms of neuropsychiatry disorders, gastro and pain.

Incorporated in the year 1989 as a bulk drug manufacturer in the pharmaceuticals industry, initially, it was focused on a service-oriented business model Contract Research and Manufacturing Services ("CRAMS"), aligned with global pharmaceutical and biotechnology companies and subsequently diversified in discovery and development of innovative molecules targeting diseases. The Company has more than three decades of experience in the pharmaceutical industry.

SLSL was inter alia engaged in two business verticals, namely, the CRAMS and the Discovery Research. In order to facilitate focused growth, operational efficiencies, business synergies, and increased operational and customer focus in relation to the CRAMS and the Discovery Research business separately it was decided to demerge the CRAMS business. Accordingly, pursuant to the Scheme of Arrangement between Suven Life Sciences Limited and Suven Pharmaceuticals Limited and their respective shareholders and creditors, sanctioned by the NCLT on January 6, 2020, the CRAMS business was demerged from Suven Life Sciences Limited to Suven Pharmaceuticals Limited with an effective date of October 1, 2018.

Since the year 2003, the Company has spent Rs. 760.63 cr. until June 30, 2022, on the development of NCE molecules. As of the date of this Letter of Offer, it has 15 molecules, out of which 7 molecules are in the clinical development phase and the rest 8 molecules are in various stages of discovery and preclinical studies.

As of July 31, 2022, SLSL had a team of 128 full-time employees of which 6 are scientists holding PhD degrees, 94 scientists holding master's degrees, 3 are holding bachelor's degrees in various disciplines of Science and the remaining 25 are into non-technical functions such as Business, finance, human 79
resources, legal and administration technical staff holding Master's Degrees in various disciplines of Science.

ISSUE DETAILS:
To part finance its plans for funding Pharmaceutical R & D and clinical trials for molecules in the pipelines (Rs. 250.01 cr.), repayment of inter-corporate deposits (Rs. 50.00 cr.), and general corporate purposes (Rs. 96.99 cr.), SLSL is offering the right issue (RI) of equity shares in the ratio of 1 for 2 to eligible shareholders whose names appear on its registered on the record date of October 18, 2022. It is issuing 72691239 equity shares of Re. 1 each at a fixed price of Rs. 55 per share to mobilize Rs. 399.80 cr. The issue opens for subscription on October 31, 2022, and will close on November 10, 2022. The full amount is to be paid along with the application for the number of shares applied. Post allotment, shares will be listed on BSE and NSE. SLSL is spending Rs. 2.80 cr. for this RI process.

This RI is solely lead managed by Ernst & Young Merchant Banking Services LLP, and KFin Technologies Ltd. is the registrar to the issue. 

Post RI, SLSL's current paid-up equity capital of Rs. 14.54 cr. will stand enhanced to Rs. 21.81 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 1191.41 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, SLSL has (on a consolidated basis) posted turnover/net profit (loss) of Rs. 21.23 cr. / Rs. - (72.15) cr. (FY21), and Rs. 17.16 cr. / Rs. - (122.00) cr. (FY22). For the Q1 of FY23 ended on June 30, 2022, it reported a loss of Rs. - (16.33) cr. on a turnover of Rs. 3.98 cr. Thus the company has been posting losses and has a carried forward negative balance. 

DIVIDEND POLICY:
SLSL last paid a dividend of Rs. 1.50 per share in February 2019 and thereafter, it skipped. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 530239 (FV Re. 1).
The scrip last quoted at Rs. 71.95 on a cum-right basis as of October 14, 2022, and turned ex-right at Rs. 67.30 on October 17, 2022. Since then, it has posted a high/low of Rs. 70.05 / Rs. 59.60. The scrip last closed at Rs. 61.70 as of October 28, 2022. The scrip has reported the last 52 weeks' high/low of Rs. 99.47 / Rs. 57.10. The counter is well managed around this RI time to lure investors to subscribe to this high-priced issue. For the last three quarters ended on September 30, 2022, the promoters' holding has been constant at 64.98%. 


Conclusion / Investment Strategy

SLSL has been in the pharmaceutical segment but has been posting losses for the reported periods of the RI documents. Based on its financial status, the issue is highly-priced. There is no harm in skipping this pricy bet despite being hovering above the RI price with some well-managed market operations.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Oct 29, 2022

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

More Suven Life Sciences Limited RI Views / Analysis / Recommendations ...

The Suven Life Sciences Rights Issue 2022 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered Rights Issue Analysts tells you if Suven Life Sciences Rights Issue 2022 worth investing. The Suven Life Sciences Rights Issue 2022 Note sets the Rights Issue expectations in systematic way which tells you if Suven Life Sciences Rights Issue 2022 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Suven Life Sciences Rights Issue 2022 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.


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